2014 UN-Water Annual International Zaragoza Conference. Preparing for World Water Day 2014: Partnerships for improving water and energy access, efficiency and sustainability. 13-16 January 2014

1. Interlinkages and trade-offs between water and
energy
Diego J. Rodriguez, Senior Economist, The World Bank

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6.  In the U.S., several power plants have had to shut down or reduce power generation due to low
water flows or high water temperatures.
 In India, a thermal power plant recently had to shut down due to a severe water shortage.
 France has been forced to reduce or halt energy production in nuclear power plants due to high
water temperatures threatening cooling processes during heat-waves.
 Recurring and prolonged droughts are threatening hydropower capacity in many countries, such
as Sri Lanka, China and Brazil.

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10. ENERGY IMPACT
CLIMATE CHANGE
RE resources
Changes in runoff, wind, crop response, ocean climate
Energy supply
Hydro – water availability and seasonality
Wind – variable wind regime
Bio-fuels – reduced transformation efficiency
Solar – reduced solar cell efficiency
Thermal - Generation efficiency and cooling water availability
Oil & Gas – extreme events
Transport/ T&D
Extreme event frequency, sea level rise
Design, O&M
Siting – sea level rise, extreme events
Downtime/ trade – extreme events
Demand
Temperature rise, inter-annual variations
Cross sector
Water resource management/ competition & siting
SOURCE: ESMAP PRESENTATION ON CLIMATE IMPACTS ON ENERGY SYSTEMS. NOVEMBER 16, 2010

11. Water scarcity changes is Asia
messages
SOURCE: WRI, 2012. The baselines water stress is defined as the ratio of total
annual freshwater withdrawals for the year 2000, relative to expected
annual renewable freshwater supply based on 1950–1990 climatic norms.
Relative location of power plants vs.
hurricane/typhoon zoning areas in Mexico
SOURCE: ESMAP PRESENTATION ON CLIMATE IMPACTS ON ENERGY SYSTEMS. NOVEMBER 16, 2010
Projected
changes in
hydropower
generation

12. Climate impact: Major increases in climate variability expected, with increased frequency of droughts and floods. Heaviest
impact will be borne by the poorest, who are already underinvested in adaptation to current climate
Health and human settlements
Major demand
increases…
▪
▪
▪
▪
…with the
potential to
derail growth
Changing settlement
patterns, with a 2004-15 to
see 40% increase in urban
population without basic
WSS access
80% of all people lacking WSS
access in rural areas
Half of urban water supplies
are from groundwater with
very little knowledge of
hydrology
Rapid urbanization
Lack of sanitation access can
cost countries up to 6% of GDP
Food and agriculture
▪
▪
▪
70% increase in food
production will be required
in 40 years (with it already
70% of withdrawals)
Half the world’s food is
grown on groundwater,
much of which is
unsustainable
Use of crops for biofuels
affecting food prices
Unreliable water supply and
farm-to-market access can
deprive farmers of 2/3rd of their
potential income
Energy and industry
▪
▪
▪
Global energy consumption
expected to increase by
~50% from 2007-2035
Water-intensive thermal and
hydro account for 90% of
current power generation
Power outages caused by
lack of cooling water already
seen in many countries
Energy security is threat-ened
by water challenges; 3% of
Kenya’s GDP from lost hydro
production over 1998 - 2000
Competition for water allocation
Impaired water quality affecting all uses
Environment
▪
▪
Ecosystem damage largely
coincides with high water
stress (e.g., Indo-Gangetic
Plain, North China Plain) and
fertilizer runoff (dead zones)
Over-consumption of water,
water pollution and
inadequate pricing of the
resource results in loss of
massive ecosystem benefits
Losses of biodiversity and
ecosystem services with
increasingly visible economic
cost (e.g., China losing 5% GDP
to pollution)

13. Water – GHG tradeoff
Dry cooling vs cost of electricity
Dry cooling systems require no water for
their operation, but decrease efficiency
of the plant:
Some policies to reduce GHG emissions
can increase water requirements by the
energy sector if not designed properly
- biofuels, carbon capture…
- increasing capital and operational costs
- increasing GHG emissions per kwh
Water for energy vs. water for
agriculture
The value of water for energy might be
higher regarding economic outputs, but
agriculture is often required for
- national security reasons (food)
- social reasons (people employed in the
agricultural sector)
Energy vs. agriculture crops
What makes more economic, social and
environmental sense?
Hydropower
Assessing tradeoffs, environmental and
social impacts and exploring the use of
multipurpose dams is necessary for
sustainable development

14. Political-level challenges impede effective planning:
 The two sectors have been regulated separately
 Current energy planning is often made without considering changes in water availability
and quality, competing uses or the impacts of climate change.
Challenges in securing enough water for energy and energy
for water will increase with population and economic
growth and climate change
Stronger integrated planning will be necessary to evaluate
tradeoffs, find synergies, and ensure sustainable
development
Hot Spots – where “low flows” and “water
temperature increase” meet
SOURCE: VULNERABILITY OF US AND EUROPEAN
ELECTRICITY SUPPLY TO CLIMATE CHANGE. VAN VLIET ET
AL, 2012

15. • Planning processes for water allocation don’t always
consider expected future demand for power
• Planning processes for power don’t consider water
availability
• When constructing individual plants and schemes,
typically consider today’s water rather than tomorrow’s
water
• Decisions being made today are locking rivers, cities,
ecosystems, power systems into particular water
consumption patterns

16. Thermal pollution from
once through cooling
has adverse effects on
ecosystem
Photograph: Paul Owen/Guardian
Hoover Dam, where record-low water levels are
threatening cheap electricity
Fracking requires large amount of water and also
generates waste water that needs to be treated
Cooling towers – requires water and may
affect water quality (return and abstraction)

18. ▪ Flexible modeling framework to facilitate tailored analyses over
different geographical regions and challenges
▪ Build on existing country knowledge and modeling tools
▪ Robust treatment of risk and uncertainty
▪ Incorporate the long-term effects of climate change
▪ Economic tools to assess the tradeoffs between competing
sectors and to provide policy recommendations to mitigate
potential effects
▪ Case studies or pilots to illustrate different types of situations in
that are most relevant for client countries

19. Water scarce country with very stressed
basins in terms of water allocation
Coal Thermal Power plants account for almost
90% of the power capacity installed
Competition for water across sectors will
increase – Power plants have priority, which
could negatively affect other sectors such as
agriculture
Fracking for Shale Gas is being explored,
which will put additional pressure on water
resources
Need for Water and Energy Integrated planning to
achieve a sustainable future and avoid water scarcity
problems in the next years
Sources - Top: CSIR, Bottom: ESKOM and Department of Energy of South Africa

20. South Africa TIMES (SATIM):
 Partial equilibrium linear optimization model capable of
representing the whole energy system, including its economic costs
and its emissions
 Five demand sectors – industry, agriculture, residential commercial
and transport - and two supply sectors - electricity and liquid fuels
 The model is capable of solving for a variety of constraints
PHASE 1:
1. Develop marginal water supply cost schedules
2. Develop the “water smart” SATIM
3. Energy-Water Model Simulations : run different scenarios to assess how energy
sector development strategies change relative to the reference scenario
depending if water is constraint, if water has a price, etc. Look at expansion of
coal, fracking, imposed GHG limits, etc.

21. SOURCE: ERC - UCT

22. …but as of now there is no
constraint on it, the model
assumes that it is an infinite
resource and with no price or
regional constraint
SOURCE: ERC - UCT

23. E-SAGE: Energy--‐extended South African General Equilibrium model
PHASE 2:
 Run the CGE model to establish reference scenario demand projections for energy.
 Run SATIM with these given demand projections to produce a new Reference case,
and then run a new EW-Nexus case that allows for reduced energy demands from
economy-wide adjustments when energy prices rise to reflect water scarcity.
 Pass SATIM findings on increased energy production costs back into the CGE model
in order to evaluate the economy-wide impact of accounting for water scarcity in
energy sector development.
 Compare these reference and EW-Nexus scenarios.
 Compare the incremental water supply costs for energy expansion across the
different water management areas in the model to other figures for water shadow
prices by water management area. Using such comparisons, highlight where
increased demands on water sources from energy sector expansion may
particularly pose challenges to efficient water management across sectors and
water management areas.

24. SOURCE: THURLOW, UNU-­­WIDER

26. messages
ECONOMIC – Future water scarcity can threaten the long-term
viability of projects and hinder development. Water constraints
may compromise existing operations and proposed projects, and
increase operational costs
DEVELOPMENT/SOCIAL – Water and energy are indispensable to
sustainable growth. Demand for water and energy is increasing.
Several regions are already experiencing resource shortages,
with profound social impacts. Climate change and economic
growth can exacerbate the problem.
ENVIRONMENTAL – Poor management of energy and water has farreaching, adverse environmental impacts. Given their
interdependence energy resources should be planned with
water resources in mind and vice versa. Adequate regulations
will be crucial to ensure a sustainable growth.
POLITICAL – If political leaders do not act now, there could be
serious economic, social and environmental consequences.
Quantifying tradeoffs between resources and planning across
sectors is critical to avoid social instability and ensure
sustainable development.
TECHNICAL – Solutions include 1) technological innovation,
development and adoption, 2) improved operations to reduce
water use and impacts in water quality, and 3) integrated
planning to assess constraints and synergies, minimize costs,
maximize welfare.

27. Thank You
Diego J. Rodriguez, Senior Economist, World Bank
drodriguez1@worldbank.org
http://www.worldbank.org/thirstyenergy